Moody's cuts Gabon's outlook to 'negative' on rising debt risk

June 24 (Reuters) - Moody's on Wednesday revised its outlook on Gabon to "negative" from "stable," saying that significant funding needs, limited financing access and potential increases in debt heighten the likelihood of the government engaging in further debt exchanges.

"Such exchanges could be classified as distressed, and therefore constitute a default," Moody's said.

The Central African oil producer plans a comprehensive audit of its past borrowing and to secure fresh funding for basic infrastructure, following years of debt management concerns and fiscal slippages.

Moody's warned that the audit could uncover previously unreported liabilities and push debt sustainability further off track.

In late April, Gabon's finance ministry signed a $150 million deal with the World Bank in a move to tighten public finances, bringing the institution's total commitment to $600 million.

According to Moody's, an IMF program could enhance borrowing access over time; however, near-term funding constraints persist, with current market conditions suggesting that international debt issuance would incur higher costs.

"We expect fiscal deficits to remain high over the medium term," said Moody's.

The ratings agency affirmed Gabon's rating at "Caa2."

(Reporting by Sruthi Narasimha Chari in Bengaluru; Editing by Vijay Kishore and Sahal Muhammed)